BILL ANALYSIS �
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UNFINISHED BUSINESS
Bill No: SB 89
Author: Senate Budget and Fiscal Review Committee
Amended: 6/27/11
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Budget Act of 2011: Vehicle License Fee and
Registration
Fee
SOURCE : Author
DIGEST : This bill recalculates the cost shares for
Department of Motor Vehicles (DMV) administration funded
from different fees and taxes collected on vehicles, and
additionally directs existing local government revenue from
the vehicle license fee (VLF) to support local public
safety realignment. For DMV, the administrative costs paid
by the VLF tax will be reduced, and the administrative
costs paid from vehicle registration fees will be
increased. As a result, the amount of VLF directed to
local governments will increase by $300 million to support
public safety realignment. Vehicle registration fees will
be increased by $12 per vehicle to cover the new cost share
from registration fees. Shifted local VLF funds will
provide another $153 million for public safety realignment
- for a total of $453 million.
Assembly Amendments delete the prior version of the bill
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and insert statutory changes in the area of vehicle fees
and tax collection in order to enact revisions to the 2011
Budget Act related to public safety realignment.
ANALYSIS :
Existing Law
1. Under current law, the VLF rate will fall from 1.15
percent of a vehicle's assessed value to 0.65 percent of
the vehicle's assessed value on July 1, 2011. Section
15 of Article XI of the California Constitution
specifies that revenue received from the 0.65 VLF rate
be expended as follows: (1) the cost of collection at
the DMV and the Franchise Tax Board, (2) allocated to
cities and counties for 1991 realignment, and (3) to
cities and counties as specified in statute.
2. Current law assigns cost shares for DMV's administrative
costs based on the proportional amount of revenue
collected from different fees and taxes. However, the
cost share for the VLF is set in statute at what the tax
revenue would otherwise be if the rate was still set at
two percent of a vehicle's value. Instead, the
permanent base rate for the VLF is now set at 0.65
percent.
3. The base rate for the vehicle registration fee is $31
annually per vehicle. The rate has not been increased
since 2004. Other fees are applied on top of the base
rate, for the Department of the California Highway
Patrol and other purposes.
4. The California Constitution specifies in Section 3 of
Article XIIIA that a charge imposed for the reasonable
regulatory costs to the state incident to issuing
licenses and permits and the administrative enforcement
and adjudication thereof are defined as fees and not
taxes.
5. SB 94 (Senate Budget and Fiscal Review Committee),
Chapter 21, Statutes of 2011, permits the Administration
to delay the mailing of vehicle registration notices
while the levels of related fees and taxes are
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determined for the 2011-12 budget.
This bill:
1. Sets the cost share of the VLF for DMV administration at
$25 million in 2011-12 and directs the Department of
Finance to work with the DMV to update the methodology
for allocating costs. By reducing the share of
administrative costs paid out of the VLF, this bill
results in an additional $300 million in VLF revenue to
allocate to cities and counties. This bill directs this
$300 million into the Local Law Enforcement Services
Account in the Local Revenue Fund 2011 to be used for
Public Safety Realignment.
2. Increases the base motor vehicle registration fee by $12
per year. This fee increase will result in new annual
fee revenue of about $300 million to cover the
administration costs of the DMV that this bill is
shifting to registration fees.
3. Clarifies that fee and tax payment on vehicles with a
due date prior to July 1, 2011, shall be attributed to
the 2010-11 fiscal year and allocated accordingly - even
if the revenue is collected on or after July 1, 2011.
This clarification is related to SB 94 (Senate Budget
and Fiscal Review Committee) that delayed DMV billing
for vehicle registration in May and June of 2011.
4. Shifts the portion of the 0.65 rate VLF that is
allocated for general local government purposes, to the
specific purpose of 2011 public-safety realignment.
These changes provide a total of $153 million for
realignment.
Comments
AB 22X1 (Blumenfield), was adopted by both houses of the
Legislature on June 15, 2011, but has not been sent to the
Governor as of June 27.
AB 22X1 includes some similar provisions as this bill
related to the VLF used for DMV administration. It is
assumed AB 22X1 will not be enacted into law, and this bill
will be the implementing legislation for changes in this
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area.
This bill provides a total of approximately $453 million
for public safety realignment. Other trailer bills in this
budget package provide additional revenue and provide for
the allocation of public-safety realignment revenues.
By setting the administrative costs for DMV of collecting
the VLF at $25 million, the costs or collection as a share
of total VLF tax collected is approximately one percent.
This is proportionally similar to the cost of collection
for the Franchise Tax Board for the personal income tax and
the corporate tax, and similar to the cost of collection
for the Board of Equalization for the sales tax.
Of the VLF revenue currently allocated to local governments
for general purposes, a portion is directed to Orange
County as relief for that county's financial crisis of the
mid-1990s, and the remainder is allocated to cities.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
DLW:do 6/28/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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